Reliance Jio impact: Data usage to increase 40% but experts warn telecoms of bleak year ahead
Telecom sector analysts find little solace with the approaching dawn of the new financial year given the competition level in the industry.
“The outlook for the industry is negative on account of the weak pricing power of the industry which would take some time to improve,” Harsh Jagnani, Sector Head- Corporate Sector ratings, ICRA Ltd told Zeebiz.
However, as mobile data subscribers made merry with the discounts brought on by the onslaught of Reliance Jio’s various offers it resulted in other companies copying the new entrant’s example and subsidising data packs.
This is expected to be a continuing trend in FY18.
“Per capita data usage is likely to increase by about 35%-40% in FY18 to 1,250MB (FY16: 600MB; FY17-Projected: 900MB. A decline in data tariffs by 20%-30% will pull down average revenue per user despite higher volumes coming from rise in data usage,” India Ratings said in a report dated February 16.
Another trend here could be the rise of dual-sim phenomena.
“Thus the data and voice usage pattern for each telco could remain inconsistent and unpredictable. Retaining customer base will necessitate the telcos to continue to augment their capacity and coverage for superior speed and virtual network platforms,” IndRa said.
Ratings agencies have turned pessimistic over expectations of longer and deeper than expected worsening of the credit profile of telecoms.
As telecoms roll out the wagon of buddle data offers trying to keep up with RJio, it is expected to put a strain on telecom company realisations in FY18 as well.
More than a week ago, Airtel introduced a new offer for its home broadband customers who will get free additional monthly data top up with their existing broadband plans in order to celebrate two million subscriptions.
In January Idea said that customers buying new 4G smartphones on Flipkart would be offered 15GB data at the cost of 1GB.
Vodafone also announced its ‘4X data on Vodafone Supernet’ offer with 4GB data plans for Rs 250 and 22GB data plans for Rs 999.
“…voice revenue to moderate in FY18 on stagnant minutes of usage (MoU) and on further moderation in voice realisations which are expected to drop to 25 paisa - 28 paisa per minute from 30 paisa - 35 paisa currently,” IndRa said.
Commenting on average revenue per user (ARPU), IndRa said, “The incumbent telcos are moving towards more bundling of voice and data plans in line with RJio’s voice calling bundled-free with data. Blended average revenue per user (ARPUs) are slated to decline by 10% in FY18,”
The impact of cheaper data packs has yet to be felt in Q3 and Q4 of FY17.
“The pressures on cash flow generation in Q3FY2017 which is expected to continue in Q4FY2017 is likely to increase the debt refinancing requirement for the industry and keep the debt coverage metrics muted,” ICRA’s Jagnani said.
Analysts from ICRA, Care Ratings and IndRa stressed that the discontinuation of RJio’s free service would be a ‘key watch event.’
“Rjio’s ability to retain market share would be driven by both pricing as well as user experience given the choice of complete reliance on voice over LTE (VoLTE) technology,” IndRa said.
“The sector will continue to be under pressure as EBITDA losses mount for some of the large players which has occurred after a long time," Care Ratings telecom analyst added.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
SBI 444-day FD vs Union Bank of India 333-day FD: Know maturity amount on Rs 4 lakh and Rs 8 lakh investments for general and senior citizens
Power of Compounding: Salary Rs 25,000 per month; is it possible to create over Rs 2.60 crore corpus; understand it through calculations
New Year Pick by Anil Singhvi: This smallcap stock can offer up to 75% return in long term - Check targets
PSU Oil Stocks: Here's what brokerage suggests on these 2 largecap, 1 midcap scrips - Buy, Sell or Hold?
Power of Compounding: How many years it will take to reach Rs 2 crore corpus if your monthly SIP is Rs 3,000, Rs 4,000, or Rs 5,000
Retirement Calculator: 40 years of age, Rs 50,000 monthly expenses; what should be retirement corpus and monthly investment
03:59 PM IST